Algorithm: Stock screeners

    Today, I want to write the topic that I think it's interesting for me which is apart from what I usually write (fundamental knowledge in investment). I think most of you might have heard about the word "algorithm". In case of investment, due to the technology era, most of the trade depends on how fast you can utilize the computer and algorithm. In my opinion, the meaning of algorithm is what patterns of trade you  put on the computer's system in order that the computer will execute the trade accordingly. There are many strategies, but what I'm interested in to write today is what are the basic stock-screening criteria.
     I got this stock-screening criteria from one of my text books. "Essentials of investment" by Bodie Kane, and Marcus, as well as the advice from my professor of this class. Let's take a look at them......

You can get all information from yahoo finance and stockcharts.com
http://finance.yahoo.com/
http://stockcharts.com/

1. Low P/BV (close to 1)
    P=Price, BV=Book Value
     Price is the market price of the stock. Book value is the Asset minus Liabilities (pls, recall from Balance Sheet topic). Both of them could be both for each stock or total value. I mean if you calculate using price for each stock you need to divide your Equity by the number of total stocks. If price is closed to book value, it is good because it still has room to grow. We call it "value stock".


2. Low P/E (less than 10)
    P=Price per share, E=EPS=Earning Per Share
     The logic is similar to P/BV that if it is low, it's not expensive yet.


3. Surprised Earning Announcement
     There is a research showing that a few months after a company announces the surprised earning, company's stock price will always go up. So, we can interpret that if any companies announce surprised earning today, we should buy them and expect their prices to go up in a few month.

4. Small market Cap
      market cap = price X numbers of share
      The logic behind this criteria is that small stocks could generate you substantial amount of profit, because they are valuable but no one know about them much. Since few analysts pay attention to them, few people know about them. So, the small cap I mean is about less than 500M.

5.Beta
      Beta shows you the change of the stock price compares to the market (index). For example, if stock A has -1 beta, when the index change 3 percent, stock A will change 3 percent also but in the opposite direction. We don't want high beta because it will be too volatile.

6. Uptrend
     You can check this criteria from the graph. It needs to show you the bottom and peak need to be higher like the following picture.

7.Dividend

     Stocks should pay dividend.

If you don't have any idea yet what kind of stock you want to buy, these 7 screeners should be a good start!!